Challenger bank set for consolidation and merger moves
SECURE Trust Bank is targeting a raft of major acquisitions which look set to spark a series of consolidations and mergers in the challenger bank sector.
This follows the sale of one-third of the bank for £6m by parent Arbuthnot Banking Group to institutional investors.
STB has offices in Birmingham Leeds, Liverpool, Newcastle, Bristol and London and the south coast, but much of its senior management team in the North West.
Its chief executive Paul Lynam reckons there is a chance to lead a transformation in the banking industry, after a series of new banks have been launched in recent years.
Arbuthnot’s sale will free up freeing up funds for STB’s for acquisitions.
“The reality is that Arbuthnot would not be able to support such a transaction, so diversifying the shareholder register opens up a broad range of strategic opportunities that aren’t on the table at the moment,” Lynam said in the Daily Telegraph.
“There are assets on the market such as Williams & Glyn and perhaps Co-op Bank, and we may be interested in giving those serious consideration.
Williams & Glyn is the brand name which has been brought back to life by the Royal Bank of Scotland, but RBS is aiming to sell it by the end of 2017.
Reports, however, suggest the sell-off may be delayed beyond that date.
Lynam said: “We are in a better position to lead the consolidation, give we were the first of the challenger banks to IPO post-crisis in 2011 and we’ve achieved 100% returns for shareholders each year for the past four years, which buys a degree of credibility with the stock market.”
He said that other challenger banks, like Shawbrook and Aldermore, have large private equity investors and this could limit their acquisition options in the same way that Arburthnot had restricted STB’s fundraising options.
“That means that of all the challengers, we’ll have the most diversified shareholder register,” he said.
The sale of £6m of STB shares is subject to the approval of Arbuthnot’s board but there is a written undertaking from chairman Sir Henry Angest, who owns 55.08% of Arbuthnot, that he will support the move.
The sale will reduce Arbuthnot’s stake from 51.9% to 18.9% after it found buyers for slightly more of its shares than it had originally announced.
It sold its shares at £25 each, which was a 10.7% discount to its closing price on May 26 – and was the cause of a 7% fall in its share price on Friday. At the same time Arbuthnot’s shares rose by 6%.
Secure Trust has said it will now look to move from the Alternative Investment Market to the main market. It has begun it search for an independent non-executive chairman to replace Sir Henry, who has combined his joint chairman and chief executive role at Arbuthnot with being chairman of Secure Trust.
Secure Trust enjoyed a strong 2015, increasing pre-tax profits by 40% to £36.5m on the bank of significant growth in the business. Lending balances increased by 73%, taking it above £1bn, while the number of customers grew by one-third, to 570,000.
